NEW YORK — Wall Street’s cool kids have been booted from the lunchroom.
Technology and biotechnology companies, high-flying stocks over the last two years, have been beaten down the last three weeks. Many are now in bear territory, which is when a stock falls more than 20 percent from a recent high.
Twitter is down 35 percent since early March and Amazon.com has slid 19 percent. Biotechnology companies have been hit just as hard. Gilead Sciences is down 16 percent and Vertex Pharmaceuticals has fallen 23 percent.
Their sudden downfall comes as investors shift from riskier investments to safer areas like utilities, health care and consumer staples, say fund managers and market watchers. The sell-off in these former darlings, whose stock prices appealed to investors because their rise seemed unstoppable, has weighed on the overall market, especially the tech-heavy Nasdaq.
The Nasdaq is down 2.1 percent this month, on top of a 2.5 percent fall in March. The Dow Jones industrial average and Standard & Poor’s 500 index fell less than half that amount last month.
A confluence of factors appears to have hurt biotech and tech stocks, market strategists say.
Investors have spent most of this year shifting away from riskier investments. The money pulled out of biotech and tech has gone into safer, dividend-paying stocks, like health care, consumer staple and utility companies. Investors typically buy utilities when they are concerned about volatility. Those companies pay big dividends, and demand for the power they generate tends to be stable, regardless of how the economy is doing.
While tech stock saw some gains Tuesday, utilities stocks rose sharply.
Other conservative investments have fared well. Bonds have outperformed the overall stock market in the first three months of 2014. And gold, which dropped 28 percent last year, is up 9 percent so far in 2014.
Investors have sought more security after last year’s blockbuster stock-market performance, which saw the S&P 500 rise 30 percent and hit multiple record highs. There are growing worries about earnings. With earnings season arriving this month, investors want to play it safe, and tech and biotech stocks have no place at the table when the market is playing defense.
“There’s clearly a rotation going on in the overall market away from these riskier stocks,” says Neill Groom, a portfolio manager at Neuberger Berman.
Tech and biotech stocks are often among the most risky investments an investor can make in the broader stock market. They tend to rise more than the rest of the market and fall more, too. That’s because they offer the possibility of higher growth, but also pose a greater risk of stumbling.